About Threadless new compensation - with numbers
When I first heard about the new compensation, I have really negative feeling towards the whole situation. From the current mood in the forum it seems the community (esp the designers) has been really supportive with the move, which is a good thing. After what happened in January, I believe this is the way to go.
The reason for my negativity is mainly about the future compensation as compared to the current one.
The current compensation is either $2000+3% royalty or 10% royalty from sale. There are other kind of compensation, but these two are the most often offered to the designers.
The new compensation will be 20% of net PROFIT.
Case 1: compared to current 10% royalty from sale
In order for this new compensation be considered better than 10% royalty, the profit must be equal or greater than 50% of the selling price of product.
Example: Selling price for product is $20 and the cost is $10. This accounts to $10 net profit.
10% from sale means 10% from $20 = $2
20% from profit means 20% from $10 = $2
Great! both system are equal
Example 2: Everything on sale. Selling price for product is now $13 and the cost is off course still $10. This accounts to $3 net profit
10% from sale means 10% from $13 = $1.3
20% from profit means 20% from $3 = $0.6
In this case the old system is more rewarding.
Case 2: compared to current $2000+3% royalty from sale
In order for this new compensation be considered better than $2000+3% royalty from sale, a design must sell around 1000-1500 pieces (assuming the occasional sale and $10 cost of production & marketing & electricity & salary).
Consider the design that was released last Monday: https://www.threadless.com/product/5717/SOUR_PUSS/tab,guys/style,shirt
There are 423 t-shirt as of now in stock. Let's assume for the first release, 500 t-shirts were made. This means the design needs to be reprinted 2-3 times before meeting the $2000 compensation. I believe in average your design need to be really popular before getting 2-3 reprints. This second and third reprints may also span over a year or two.
Now the twist is there will be weekly cash prize! No number has been revealed yet. I am guessing it will be less than $10,000 but more than $2,000. Less than $10,000 because $10,000 is what Threadless paying per week currently (5 new designs, 5 x $2,000 = $10,000). There's no point of changing the system if the payout is the same. More than $2,000 because now Threadless is saving a lot. Also because Threadless starts from $2,000; it needs to be something more alluring. My guess is $5,000 for one winner per week.
UPDATE: There is no twist. There will be no upfront payment or cash incentive for designs that won regular challenge.
What I am worried about from all this:
1. Threadless will no longer be printing 500 items for first run. Now Threadless doesn't pay $2000 upfront anymore, there's no need to recover the $2000 design cost.
2. Threadless will print more unpopular, non-selling designs
3. On the other extreme, Threadless will turn into Teefury
4. More voting abuse
5. People moving away
List of good things that will certainly happen:
1. Rights returned to designers. This is the best thing that happened at Threadless.
2. Much much more payout as compared to $2000 to some really popular designs. It will be A LOT more.
3. You can sell on other websites.
4. In the long run this system is better, but only if your design can survive the long run.
List of things that I wish will happen:
1. Individual store page per designer, just like Society6
2. Threadless choosing more designs.
3. (Reserved for later)
4. (Reserved for later)